Investment accounts hold stocks, bonds, mutual funds, and the like for individuals, trusts, corporations, and other investors. Investors typically utilize such accounts to achieve long and short term savings goals and as an aid in tax planning. The holdings of an investment account may be manipulated by the investor, such as by an investor executing securities purchases or sales via a graphical user interface and an Internet connection. An investor can be any of a number of different types of entities, including an individual or a business. The holdings of an investment account may also be manipulated by an entity managing or otherwise associated with the investment account, such as a money manager, a brokerage firm (sometimes referred to as a broker-dealer or a sponsor), or some other type of investment firm.
Typically, a professionally managed investment account is associated with an asset allocation model that reflects an investment style (e.g., aggressive, growth, value, income) and a money manager's preferred mix of specific assets (e.g., stocks, bonds, cash) in conformity with the style. When an investor establishes an account, the initial investment is distributed among assets in accordance with the model. An investment account such as a multi-strategy portfolio (MSP) account may consist of a number of individual accounts, each of which is associated with its own investment style and model. MSP accounts can also be associated with an overlay model that reflects the relative distribution of assets across sleeves. Additional information on models and their use is described in U.S. patent application Ser. No. 10/372,724, filed Feb. 25, 2003, titled “Multi-style Client Investment Managed Accounts with Transaction Tagging”, the contents of which are incorporated herein by reference as if set forth fully herein.
It will be appreciated that an investor may customize a particular investment account associated with an asset allocation model through the use of restrictions. Restrictions constrain the ability to use an investment account to trade security instruments, such as buying or selling stocks. Additional information on restrictions and systems in which they are implemented is disclosed in U.S. application Ser. No. 11/146,015, titled “Automated Actions Based on Restrictions”, filed Jun. 7, 2005, and U.S. application Ser. No. 11/389,909, titled “Systems, Methods, and Computer Program Products for Processing Orders Subject to Investment Restrictions”, filed Mar. 27, 2006 (collectively the “Restriction Applications”), the entire contents of both of which are incorporated herein by reference as if set forth fully herein. Restrictions are typically associated with explicit or implicit resolution rules that indicate actions are taken when a restriction violation is detected. For instance, if a restriction stipulates that a particular security cannot be purchased, the resolution rule may stipulate that the assets that were to be used for the restricted purchase be left as cash in the investment account.
It will be appreciated that over time the mix of assets in an investment account (or a sleeve within an account) subject to an investment allocation model may deviate from an ideal mix defined by the model because of specifically ordered trades, ad-hoc deposits of assets that are not part of the model, or investment gains and losses. This deviation is referenced generally herein as drift. Drift from an allocation model is typically calculated either periodically or on an ad hoc basis, and certain portfolio management functions and/or trading tools take into account allocation models and drift. Additionally, it should be appreciated that the drift in an account will intensify after the passage of any time in which investment gains and losses may be incurred.
Traditional monitoring of drift fails to take into account restrictions and their associated resolution rules. This is particularly problematic if restrictions, resolution rules, and allocation models are at odds regarding the appropriate assets to add to an investment account. As a result, functions such as account rebalancing to realign assets to adhere more closely to an asset allocation model may generate a number of unnecessary trade orders or, at the very least, execute unnecessary processing in generating offsetting trade orders. When a large number of accounts with many restrictions and associated resolution rules are under management, this can significantly affect overall system efficiency.
What is needed are methods, systems and computer program products that minimize the drift of an investment account and the processing to correct such drift by taking into account the history of applicable restrictions and their resolutions in portfolio management functions that use an asset allocation model.